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January 05, 2012 at 10:20 AM
San Francisco may have reduced the ability of employers in the city to use health reimbursement arrangements (HRAs) to comply with the city’s Health Care Security Ordinance, which requires most employers in the city to help pay for employees’ health care.
For-profit San Francisco employers with 20 or more employees and nonprofit employers with 50 or more employees must pay a minimum amount in health benefits for each hour the employee has worked. An employer can use the payment to pay for health coverage, fund a health account, or reimburse an employee for medical expenses.
Ed Fensholt, a compliance services lawyers at Lockton Benefits Group, a unit of Lockton Companies L.L.C., Kansas City, Mo., has written about the changes in a compliance alert.
Fensholt, who helped Lockton develop a guide to the San Francisco health benefits mandate, notes that some employers have been complying with the mandate by contributing to HRAs — health accounts controlled by the employer.
The laws and regulations governing HRAs let employees can roll HRA purchasing value over from year to year, but the employer continues to own the purchasing power in the account and can take it back when employees leave.
When an employee at a San Francisco employer using the HRA compliance strategy has left, the employer has exercised its right recapture the employees’ HRA contributions, Fensholt says.
San Francisco now has changed the health benefits mandate to make using HRAs to meet the requirements more difficult, and it has added new administrative rules that appear to make using the HRA strategy less appealing, Fensholt says.
Some San Francisco employers have imposed surcharges on customers to pay for the mandated health benefits, and the city also has added new reporting requirements on employers that impose health mandate surcharges, Fensholt says.
